Up to a million Canadians would struggle to cope with a 1 per cent rise in interest rates with 700,000 at risk from even a 0.25 per cent rise

Some homeowners may over-borrow due to the availability of HELOCs, the Financial Consumer Agency of Canada is warning.

The agency has considered the use of home e quity lines of credit and how banks use them in a new report and found that lenders are increasingly offering readvanceable mortgages, combining term mortgages with HELOCs and other credit products.
It says that customers are not given clear enough information on how these products work.

“HELOCs may lead Canadians to use their homes as ATMs, making it easier for them to borrow more than they can afford,” said FCAC commissioner Lucie Tedesco.

The agency notes that HELOCs offer many benefits to consumers when used responsibly but it is concerned that some homeowners will take on less manageable debt due with interest-only options that can mean them holding more debt for longer periods.